Estate of George Nickola v. Mic General Insurance Company
152535
Mich.May 12, 2017Background
- In 2004 George and Thelma Nickola were injured by an underinsured tortfeasor; the tortfeasor’s carrier paid policy limits and the Nickolas sought UIM benefits from their insurer, MIC General.
- MIC denied the UIM claim as failing to meet the tort threshold; the Nickolas demanded arbitration and sued to compel arbitration when MIC initially refused.
- Arbitration was delayed for years while the parties’ two arbitrators could not agree on a neutral; after the court eventually appointed a third arbitrator, an arbitration panel awarded $80,000 to George and $33,000 to Thelma.
- The arbitration award excluded post-award interest, fees, and costs; plaintiff then moved for judgment and sought 12% penalty interest under the Uniform Trade Practices Act (UTPA), MCL 500.2001 et seq.
- Trial court and Court of Appeals denied UTPA penalty interest, holding the UIM claim was "reasonably in dispute" (thus precluding penalty interest for a third-party tort claimant). The Michigan Supreme Court granted review and reversed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether an insured seeking UIM benefits is subject to the UTPA 12% "penalty interest" only if the claim is not "reasonably in dispute" | Nickola: As insureds (or persons directly entitled to benefits), they fall under the first sentence of MCL 500.2006(4) and are entitled to 12% interest if benefits not timely paid, regardless of whether the claim was reasonably in dispute | MIC: A UIM claim effectively places the insured in the shoes of a third-party tort claimant; the statute’s "reasonably in dispute" limitation therefore applies and bars penalty interest here | Court: The statute’s two sentences create distinct classes; the "reasonably in dispute" limitation appears only for third-party tort claimants, so insureds seeking UIM benefits are not subject to that limitation and may recover 12% interest if other statutory prerequisites are met |
| Whether the nature of a UIM claim (requiring proof akin to a tort claim) transforms an insured into a third-party tort claimant for MCL 500.2006(4) purposes | Nickola: The identity of the claimant controls; requiring additional proofs under a UIM endorsement does not turn an insured into a third-party claimant | MIC: Because UIM recovery depends on effectively proving the tortfeasor’s liability, the UIM claimant is "essentially" a third-party claimant | Court: The statute distinguishes claimant identity, not claim form; UIM proof requirements do not change an insured’s status as a party to the insurance contract |
| Whether prior Court of Appeals precedent (Ferwerda) controls | Nickola: Yaldo and Griswold support treating insureds differently from third-party tort claimants | MIC: Ferwerda (and related panels) treated some contractual claims tied to third-party torts as subject to the "reasonably in dispute" rule | Court: Overrules Ferwerda to the extent inconsistent; follows Yaldo and Griswold that the limitation applies only to third-party tort claimants |
| Whether the trial court must still determine proof-of-loss or other statutory prerequisites for penalty interest | Nickola: Seeks penalty interest but acknowledges factual prerequisites (e.g., satisfactory proof of loss) must be resolved | MIC: Argues procedural/factual failures (e.g., no satisfactory proof of loss) justify denial | Court: Leaves factual issues (satisfactory proof of loss, timeliness, etc.) to the trial court on remand; decision only addresses statutory scope |
Key Cases Cited
- Yaldo v. North Pointe Ins. Co., 457 Mich 341 (Mich. 1998) ("reasonably in dispute" language in MCL 500.2006(4) applies only to third-party tort claimants)
- Griswold Props., LLC v. Lexington Ins. Co., 276 Mich App 551 (Mich. Ct. App. 2007) (conflict-panel decision affirming that insureds are entitled to 12% interest irrespective of reasonable dispute)
- Auto-Owners Ins. Co. v. Ferwerda Enterprises, Inc., 287 Mich App 248 (Mich. Ct. App. 2010) (treated certain insurer obligations tied to third-party torts as subject to "reasonably in dispute"; overruled to extent inconsistent)
- Arco Indus. Corp. v. American Motorists Ins. Co., 233 Mich App 143 (Mich. Ct. App. 1998) (Court of Appeals decision addressing interaction of contract claims and the UTPA interest provision)